Legal Institutions and Financial Development

42 Pages Posted: 21 Apr 2004 Last revised: 3 Sep 2010

See all articles by Thorsten Beck

Thorsten Beck

City University London - Sir John Cass Business School; Tilburg University - European Banking Center, CentER

Ross Levine

University of California, Berkeley - Haas School of Business; National Bureau of Economic Research (NBER)

Multiple version iconThere are 3 versions of this paper

Date Written: December 2003

Abstract

This paper provides a concise, selective review of research on the role of legal institutions in shaping the operation of financial systems. While a burgeoning literature finds that financial development exerts a first-order impact on economic growth, the law and finance literature seeks to understand the role of legal institutions in explaining international differences in financial systems. Considerable research dissects, critiques, and debates the influence of investor protection laws, the efficiency of contract enforcement, and private property rights protection on the effectiveness of corporate governance, the efficient allocation of capital, and the overall level of financial development. Furthermore, legal scholars, political scientists, historians, and economists are questioning and assessing the importance of historically determined differences in legal traditions in shaping national approaches to investor protection laws, contract enforcement, and property rights. The field of law and finance promises to be a contentious and important area of inquiry in coming years.

Suggested Citation

Beck, Thorsten and Levine, Ross Eric, Legal Institutions and Financial Development (December 2003). NBER Working Paper No. w10126, Available at SSRN: https://ssrn.com/abstract=476083

Thorsten Beck

City University London - Sir John Cass Business School ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom

Tilburg University - European Banking Center, CentER ( email )

PO Box 90153
Tilburg, 5000 LE
Netherlands

Ross Eric Levine (Contact Author)

University of California, Berkeley - Haas School of Business ( email )

545 Student Services Building, #1900
2220 Piedmont Avenue
Berkeley, CA 94720
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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